The Reserve Bank of Australia (RBA) has warned that rising house prices and interest rates could have a significant effect on affordability.
Speaking at the Committee for Economic Development of Australia’s housing forum yesterday, the RBA’s Tony Richards said supply was not keeping up with the increasing level of demand driven by the surging population.
“Mortgage rates are particularly low at present and, as the bank has noted on a number of occasions, it is not reasonable to expect that interest rates will stay at the current low levels indefinitely,” he said.
“When they do rise towards more normal levels, discussions on housing affordability will again focus more on the level of housing prices relative to incomes.”
Rising rates aside, Mr Richards warned that the growing population could also dampen affordability.
The average annual population growth has jumped from 240,000 per year to 340,000 per year – an increase of around 40 per cent.
“Yet the number of dwellings we have built has not risen. Commencements of new housing over the past five years have averaged around 150,000 dwellings, versus around 155,000 over the previous five-year period.
“ It would not be surprising if this was one factor that had contributed to the increase in the cost of housing over the past decade,” Mr Richards said.